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NYU Study Eyes Pay-for-Performance for Hospitals

June 30, 2010

Pay-for-performance is an increasingly popular approach to improving health care quality. But the planned nationwide implementation of institutional bonuses mandated under federal health care reform threatens to act as a “reverse Robin Hood,” potentially causing hospitals in less-advantaged regions to lose funds to health care facilities in more affluent areas of the country, according to a study published in the academic journal PLoS Medicine.

“Pay-for-performance assumes that providers have adequate economic and human resources to perform, or improve their performance, within a short time frame,” according to the researchers. “Yet the prevailing distribution of resources in the U.S. health care system makes it difficult for some providers to operate effectively as it is. Payment based on performance may worsen inequalities, as hospitals in under-resourced areas lose funds to their better-off counterparts, with the government acting as a sort of ‘reverse Robin Hood.’ ”

Offering bonuses to doctors when they reach pre-determined targets, such as for the regularity of blood sugar checks for patients with diabetes, is a practice that has been adopted widely over the past decade by countries with rapidly aging populations and rising health costs, among them the UK, Australia and Taiwan. Pay-for-performance has also been used in the United States, albeit in a piecemeal fashion. Now, however, the U.S. is poised to evaluate hospitals in Medicare’s “Value Based Purchasing” (VBP) program, and, based on results, to reward those that improve, and reduce reimbursements for those that fail to show progress toward performance targets. The first wave of nationwide evaluation under this federally mandated effort, slated to begin in 2012, will focus on hospital performance on process-of-care measures for common conditions such as heart attack and pneumonia. Later, VBP will likely be extended to other metrics such as risk-adjusted patient death rates.

In examining the association between a hospital’s local economic and workforce resources and its ability to improve patient care, the researchers examined complete reporting data provided by 2,705 hospitals from 2004 to 2007 to U.S. Centers for Medicare and Medicaid Service (CMS), the federal agency that leading the initiative. The researchers analyzed these hospitals’ performance over the four-year period in treating myocardial infarction and heart failure, using a methodology previously suggested by the CMS to score hospital performance. They then calculated scores for each hospital.

“U.S. hospitals operating in locations with richer economic and human resources attained significantly higher clinical process scores than those located in less advantaged areas during the period 2004-2007,” according to the study. A lag in the clinical indicators translated into substantially lower net scores under the CMS’s Performance Assessment Model, which would presumably lead to reduced funding under Medicare’s “Value Based Purchasing.” However, the details of hospital VBP remain to be determined by the Centers for Medicare and Medicaid Service. As the authors emphasize, there are still opportunities “to modify and improve upon the current version” of hospital pay-for-performance.

“Holding providers accountable is not an unreasonable approach to quality improvement” the study concludes, but “it must be done in a way that attends to the profound inequalities in local circumstances that shape life in the twenty-first century.”